may be imposed if the defendant acted in an oppressive manner.

Petitioner acted oppressively when he

G.R. No. 173227.January 20, 2009. * pestered respondent to pay interest and threatened to block her transactions with the PNO if she would not
pay interest. This forced respondent to pay interest despite lack of agreement thereto. Thus, the award of
exemplary damages is appropriate so as to deter petitioner and other lenders from committing similar and
SEBASTIAN SIGA-AN, petitioner, vs. ALICIA VILLANUEVA, respondent. other serious wrongdoings.

Facts: Respondent filed a complaint for sum of money against petitioner. Respondent claimed that petitioner
approached her inside the PNO and offered to loan her the amount of P540,000.00 of which the loan
agreement was not reduced in writing and there was no stipulation as to the payment of interest for the loan.
Respondent issued a check worth P500,000.00 to petitioner as partial payment of the loan. She then issued
another check in the amount of P200,000.00 to petitioner as payment of the remaining balance of the loan of
which the excess amount of P160,000.00 would be applied as interest for the loan. Not satisfied with the
amount applied as interest, petitioner pestered her to pay additional interest and threatened to block or
disapprove her transactions with the PNO if she would not comply with his demand. Thus, she paid
additional amounts in cash and checks as interests for the loan. She asked petitioner for receipt for the
payments but was told that it was not necessary as there was mutual trust and confidence between them.
According to her computation, the total amount she paid to petitioner for the loan and interest accumulated
to P1,200,000.00.

The RTC rendered a Decision holding that respondent made an overpayment of her loan obligation to
petitioner and that the latter should refund the excess amount to the former. It ratiocinated that respondents
obligation was only to pay the loaned amount of P540,000.00, and that the alleged interests due should not
be included in the computation of respondents total monetary debt because there was no agreement
between them regarding payment of interest. It concluded that since respondent made an excess payment
to petitioner in the amount of P660,000.00 through mistake, petitioner should return the said amount to
respondent pursuant to the principle of solutio indebiti. Also, petitioner should pay moral damages for the
sleepless nights and wounded feelings experienced by respondent. Further, petitioner should pay exemplary
damages by way of example or correction for the public good, plus attorneys fees and costs of suit.

Issue: (1) Whether or not interest was due to petitioner; and (2) whether the principle of solutio indebiti
applies to the case at bar.

Ruling: (1) No. Compensatory interest is not chargeable in the instant case because it was not duly proven
that respondent defaulted in paying the loan and no interest was due on the loan because there was no
written agreement as regards payment of interest. Article 1956 of the Civil Code, which refers to monetary
interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing.
As can be gleaned from the foregoing provision, payment of monetary interest is allowed only if: (1) there
was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was
reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest.
Thus, we have held that collection of interest without any stipulation therefor in writing is prohibited by law.

(2) Petitioner cannot be compelled to return the alleged excess amount paid by respondent as interest.
Under Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no stipulation
therefor, the provisions of the Civil Code concerning solutio indebiti shall be applied. Article 2154 of the Civil
Code explains the principle of solutio indebiti. Said provision provides that if something is received when
there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.
In such a case, a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes
the creditor who then has the right to demand the return of payment made by mistake, and the person who
has no right to receive such payment becomes obligated to return the same. The quasi-contract of solutio
indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of
another. The principle of solutio indebiti applies where (1) a payment is made when there exists no binding
relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the
payment is made through mistake, and not through liberality or some other cause. We have held that the
principle of solutio indebiti applies in case of erroneous payment of undue interest.

Article 2232 of the Civil Code states that in a quasi-contract, such as solutio indebiti, exemplary damages